India’s Coal Ministry in no rush with coal auctions

KOLKATA (miningweekly.com) - India’s Coal Ministry has decided not to rush through the auction of coal supply linkage to power companies in light of the high availability of the fuel, although the auction of such linkages would take place for non-power industries.

The rules for the auction of coal linkage to the power sector have been compiled and the Coal Ministry will secure inter-Ministerial consultations and approval of the Union Cabinet shortly; however, the government is in "no hurry" to hold auctions for the power sector in the face of the sufficient coal stocks that are available for power plants to procure on a spot basis, a Ministry official said.

He said that in the first tranche of auctions Coal India Limited (CIL) had earmarked about 25-million tonnes of coal for supply to thermal power plants through auction of linkages, but that there was no compelling reason to hold such auctions immediately as most plants were either carrying sufficient stocks or its was readily available from CIL.

“The government was never in a hurry to auction off linkages to the power sector as there was sufficient availability of coal for all sectors in the country,” Power Minister Piyush Goyal said in a recent statement to local media.

A section of government officials said, off the record, that the moot point was that "sufficient availability", while a reality, was not a result of positives on the supply side of coal but the negatives of falling demand from the key consuming sector-thermal power plants.

The absence of any rush to go ahead with linkage was, therefore, more of a compulsion, as against the backdrop of such falling demand few thermal power companies would be keen to commit significant capital upfront to bid at the auctions.

According to official government data released last month, the average plant load factor (PLF) of thermal power companies had fallen below the 60% mark, the lowest in the past ten years.

The data showed that during April to December 2016, average PLF was down to 59.64%, a decadal low amidst the 61.58% average PLF of during the decade past. The sharp downturn was underlined by the fact that PLF averaged 74% in 2011/12.

In a government note on the power sector, it was pointed out that while capacity addition was growing at around 14% a year, consumption of electricity, a factor of falling industrial production and capacity use, was a mere 6% per year.

This was reflected in offtake of coal, which, during the period April to December 2016, CIL reported at 392-million tonnes, well below the miner’s target of 434-million tonnes.

However, a Coal Ministry official said that coal supply linkage would be conducted for non-power sectors like cement, sponge iron and steel where the end produce of these industries was not under any government price regulation, unlike electricity.

CIL was expected to set aside an estimated 15-million tonnes of coal for the first round of such linkage auctions, he added.